MoneroV – A new (scam?)hard fork coming to town

Monero (XMR), the popular privacy-focused coin, has seen its share of controversy in the past. Heavily criticized as the main beneficiary of crypto mining malware (with hackers taking full advantage of the coins unrivaled privacy technology), it has lately found itself in hot waters for reasons associated with hard forks. A recent announcement has informed the crypto world of an alleged hard fork of Monero, named MoneroV, coming via airdrop in mid-March. From the unsupported LCC fork disparaged by Charlie Lee to outright scams masquerading under the Bitcoin name, hard forks have always been a contentious issue that could split or even shut down entire communities. Same has happened with MoneroV, as the news of its near-arrival caused many strained relationships and opposing views throughout the Monero community.

The Good

MoneroV is the newest rendition of the recently-popularized genre of privacy coins. MoneroV is a community-led project designed to create a limited supply hard-fork of the Monero cryptocurrency, built upon a new scalable blockchain algorithm. MoneroV developers claim how the original Monero currency is flawed, both in the sense of not having a hard cap on its supply and in having a “centralized, slow development team which prevents new users and technologies from being implemented”. They also cite the scaling issues of a bloated Monero blockchain, its high transaction fees, the growing hash rate that is mainly based on mass usage of botents (a typo from their roadmap) and browser based hijacking of people’s PCs which creates unfair competition for genuine miners.

Basically, the idea is that it’s better to create a hard-fork split that will indefinitely fix the problems with Monero than to wait for an upgrade of the original blockchain which could take months to design and implement. MoneroV website claims that this coin will “fulfill the long overdue desire for a truly anonymous, decentralized, finite peer-to-peer electronic currency”, thus making it the “Best Private Digital Currency in the World”.

Monero and MoneroV head-to-head

The main requirement to become an owner of this coin is to own Monero once its blockchain reaches the block 1529810. At this point the fork will happen and XMV coin will become mineable on the new MoneroV blockchain. This blockchain will contain the history of all transactions that happened on the XMR chain in the past; accordingly, all Monero coin holders will be airdropped 10x their XMR balance in MoneroV coins (XMV) after the fork. A wallet with the same address, private keys, and mnemonic phrase you had in Monero will be created for you and your XMV holdings. Devs advise the users to check if their coin holding service supports the split. If that isnt the case, they are advised to transfer their XMR holdings into a private wallet prior to the fork, as they will need to control (and share!) their own private keys in order to create a XMV wallet.

The coin will have a capped supply of 256 million XMV; the airdrop will include 158 million of pre-mined MoneroV. The currency will utilize the Cryptonote protocol, a staple of Monero which allows obfuscation of transaction related data. The plan is also to integrate a so called “MimbleWimble” protocol which would fix Monero scaling issues. Finally, the dev team promises to release a light MoneroV wallet which won’t require users to download the entire blockchain to hold their coins.

The Bad

While at first it may seem that MoneroV is free money, you might find that it comes with some extra perks which could prove extra costly. The main issue of contention is the potential of this fork to violate the privacy of Monero users. If a user has the same address on both the Monero and MoneroV blockchain, making a transaction on either of those chains will spend a transaction output and will produce the same key image on the other chain. A key image, in simple terms, allows the Monero network to confirm whether an output has been spent or not quickly. Spending the same transaction on another chain will result in a ring signature to the key image which will have the same output but different decoy inputs. A malicious player could compare the two signatures and deduce which input was the one that was spent, and hence uncover some of the privacy offered by Monero. By claiming XMV you risk exposing your ring signatures, which are an important part of Monero’s privacy system. It gets even worse if you consider that your inputs can act as decoys for someone else’s transaction; if an input that was already revealed as spent becomes a part of someone else’s signature it automatically weakens the rings ability to protect the users privacy. This means that the negligence of other Monero users can affect the state of privacy on the entire network. Finally, the problem mentioned above is more severe on the XMV chain due to its expected low user base. Some reddit users have even jokingly compared the coin to NSA sting operation designed to expose people’s privacy. For more information on this specific issue, check out this excellent video.

Even though MoneroV technically isnt a hard fork of Monero it will be aiming to snatch its users and miners, therefore a possible network takeover talk isn’t out of the order. A centralization of mining operations using proof of work could theoretically allow a selected group of individuals to gain control over the entire network. Namely, too many ASIC miners could potentially centralize the network. According to reports, Monero devs plan an actual hard fork which will bring an upgrade to CryptoNote proof-of-work algorithm to prevent it from being effectively mined by application specific integrated circuit (ASIC) hardware. The Monero team explained the threat of centralization in a lengthy blog post last month and warned against reuse of Monero keys for forked versions. This problem is closely related to the issue of a 51% attack, a term that has become common with every new hard fork. If enough miners become attracted to the prospect of mining MoneroV a chain reaction could happen; this reaction would rob the Monero blockchain of its hashrate and leave it dead in the water. A dreaded issue that faces Monero users is related to double-spending; namely if you make a transaction a few days post-fork you risk the possibility of that transaction being transmitted on both blockchains and robbing you of your funds.

While MoneroV developers expect that XMV prices will rise alongside Monero, they fail to notice that their coin is entering an increasingly crowded private coin market which already includes popular choices like Dash, Zcash, Zcoin, Pivx, Komodo, and Verge. The official dev team of Monero have distanced themselves from MoneroV, claiming that they dont know its developers and at the same time strongly discourage users from handing out their Monero wallet private keys. It is also unlikely that exchanges or wallets will support the fork (similarly to what happened with Litecoin Cash), meaning that the trading market for the coin wont be there and its price will stagnate even further. The MoneroV project also has a set pre-mine of 10 percent, which is frowned upon by many in the cryptocurrency space as pre-mining has been a tactic often used as a part of a pump and dump schemes.

Some final attention needs to be placed on a couple of minor details. While the coin boasts a finite supply which will supposedly prevent inflation much better than Monero does, a closer analysis of the Monero coin economy suggests that the yearly increase of Monero coins coincides with the yearly loss of coins that happens due to various reasons (like coin burning or people misplacing their funds and removing them from the supply forever). The projects whitepaper is also dubious, as its littered with spelling errors and throws around buzzwords at the reader like there is no tomorrow. Finally, people should be wary that scammers have began circling as initial attempts to profit off the hype can already be found on the internet.

The Ugly

So far it seems that MoneroV wont have much success in either gaining a good user base or grabbing hold of Monero hashrate. Neither will they manage to hurt the Monero network by exposing its inputs as an estimation shows that more than 33 percent of the inputs needs to be tainted for the network to feel it. Monero contributor Justin Ehrenhofer recommends increasing the ring size from five to eight, which would increase security but would bloat the Monero chain even more. Still he claims: “For a modest increase in fees and transaction size, we can be much more assured that Monero’s ring signatures are prepared for large chain split attacks.” While more than six percent of transactions could be compromised with a ring size of five, less than 0.8 percent would be compromised with a higher size of eight, according to Ehrenhofer’s estimates.

Monero users are advised to hold back from making any transactions over the period of the split (around March 14), or when/if XMV is added to exchanges and experiencing large price gyrations. As there are plenty of red flags surrounding the project, the best cours eof action would be to stay away completely from this one.

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